the economic contribution of the drinks industry economic...objective the objective of this report...

The Economic Contributionof the Drinks Industry

Commissioned by the Drinks Industry Group of Ireland

Anthony Foley - July 2008

Published in 2008 by:Drinks Industry Group of Ireland,Anglesea House, Anglesea Road,Ballsbridge, Dublin 4

Copyright © Anthony Foley and Drinks Industry Group of Ireland

The Economic Contributionof the Drinks Industry

Commissioned by the Drinks Industry Group of IrelandJuly 2008

by Anthony FoleyDublin City University Business School

the economic contribution of the drinks industry 1

Alcohol Beverage Federation of Ireland • Beverage Council of IrelandIrish Hotels Federation • Licensed Vintners Association • National Off Licence AssociationRestaurants Association of Ireland • Vintners Federation of Ireland

Co

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tsContentsExecutive Summary

Objective ........................................................................................................... 5

Main Economic Changes................................................................................... 5

Structure of the Industry .................................................................................... 5

Economic Contribution and Role ...................................................................... 5

Data ................................................................................................................... 6

Consumption ..................................................................................................... 6

Employment....................................................................................................... 6

Balance of Payments and Foreign Exchange .................................................... 7

Taxation and Other Aspects .............................................................................. 7

Conclusions........................................................................................................ 7

Chapter 1

Introduction ....................................................................................................... 8

1.1 Introduction and Objective .................................................................. 9

1.2 Economic Benefits .............................................................................. 9

1.3 Methodology and Data...................................................................... 10

1.4 Definition of the Drinks Industry ........................................................ 10

1.5 Structure of the Report ...................................................................... 10

Chapter 2

Structure of the Drinks Industry and Production ............................................. 11

2.1 Introduction........................................................................................ 12

2.2 Manufacturing; Structure & Production ............................................. 12

2.3 Retail & Wholesale; Structure & Production ...................................... 14

2.4 Summary of Structure and Production............................................... 16

Chapter 3

Consumption of Alcohol and Non Alcoholic Beverages................................. 17

3.1 Introduction........................................................................................ 18

3.2 Data Sources ...................................................................................... 18

3.3 International Comparisons of Consumption ...................................... 20

3.4 Trends in Consumption ...................................................................... 21

3.5 Consumer Expenditure on Beverages ............................................... 22

3.6 Product Categories ............................................................................ 23

3.7 Off and On Licence............................................................................ 24

3.8 Summary of Consumption ................................................................. 24

2

Chapter 4

Employment..................................................................................................... 25

4.1 Introduction........................................................................................ 26

4.2 Employment ....................................................................................... 26

4.3 Skill Levels .......................................................................................... 29

4.4 Earnings.............................................................................................. 30

4.5 Productivity......................................................................................... 32

4.6 Summary of Employment................................................................... 33

Chapter 5

Balance of Payments and Foreign Exchange ........................................................... 34

5.1 Introduction........................................................................................ 35

5.2 Imports and Exports of Beverages..................................................... 35

5.3 Domestic Market and Role of Imports............................................... 36

5.4 Net Foreign Exchange Receipts ........................................................ 38

5.5 Summary of Balance of Payments and Foreign Exchange ................ 38

Chapter 6

Taxation, Level and Revenue and Other Aspects............................................ 39

6.1 Introduction........................................................................................ 40

6.2 Taxation Level & Revenue.................................................................. 40

6.3 Linkages ............................................................................................. 43

6.4 Other Aspects of Economic Role....................................................... 44

6.5 Summary of Taxation, and Other Aspects ........................................ 45

Chapter 7

Conclusions...................................................................................................... 46

References ....................................................................................................... 49


ExecutiveSummary

4

Objective

The objective of this report is to identify the economiccontribution of the drinks industry to the Irish economy.It updates the 1999 and 2004 DIGI reports which dealtwith the same issue. The report seeks to informpolicymakers and the public of the substantialeconomic contribution made by the industry in theproduction and distribution of beveragesIt is also intended as a starting point for those seekingmore in-depth up to date information on the drinksindustry and identifies the main data sources. Thedrinks industry is defined to include the manufacture,wholesale distribution and retail distribution of bothalcoholic and non-alcoholic beverages.

The report examines output, consumption,employment and skills, the impact on the balance ofpayments and foreign exchange, taxation contributionand other issues. It broadly follows the structure of the2004 (Foley) DIGI report on the economic role of theindustry.

Main Economic Changes

The main economic changes in the industry over thepast several years are the continuing growth in the off-licence share at the expense of the on-licence share,the growth in the share of wine in total consumption atthe expense of domestically produced products, thegrowth in the import share of consumption ofdomestically produced products such as beer, spiritsand cider, relative stability of per capita and per adultalcohol consumption at levels below the peak levels of2001 and decline in the alcohol share of personalconsumption.

All of these factors have a negative impact on the scaleof the economic contribution generated by the drinksindustry. The industry continues to generate substantialemployment and economic activity such as directemployment of 61600 full-time job equivalents.Thenegative changes are a continuation of longer-termtrends. However, total consumption of alcoholincreased by 10.8% in volume between 2000 and 2007but the production of domestically produced alcoholdeclined by 21.8% and the volume of importedalcoholic beverages grew by 90%. The share of marketsales held by the employment and tax revenueintensive on-licence sector declined from 72% to64% between 2000 and 2006 , There are also concernsfor the sustainability of many small rural public housesdue to the changed economic and regulatoryenvironment.

Structure of the Industry

The retail segment is comprised of many very smallenterprises. Relatively small numbers of licensedpremises have levels of turnover in excess of €1.25M.Pubs outside Dublin have much lower turnovers thanpubs in Dublin. Large numbers of non-Dublin pubshave very low turnover levels. 36% of Dublin pubs andonly 1.3% of non-Dublin pubs had turnovers of€1.25M or more in 2003. 59.7% of non-Dublin pubshad an annual turnover of less than €200,000. Theretail side is characterised by, primarily, small ownermanaged enterprises.

The retail sector is characterised by small size. Theaverage number of full time staff in public houses was3.7 in 2003, based on DIGI data. The CSO’s 2005Annual Services Inquiry reports an average full time barstaff employee’s level of 4.3; including all staff theaverage size is 7.2. The Failte Ireland survey reports anaverage pub size including part-timers of 7.7 in 2006;the full-time average size was 3.9 persons.

The manufacturing segment was composed of 34enterprises in 2006 and 27 enterprises and 30 localunits in 2005. The sector includes very large companiessuch as Diageo and Irish Distillers. Average size of localunit in drinks is higher than in manufacturing as awhole, 136 persons in drinks compared to 48 inmanufacturing as a whole. Earnings, productivity andvalue added ratios are also relatively high. Wages andsalaries per person is €57,296 in the drinks industrycompared to €35935 in manufacturing as a whole.Drinks net output is 67% of gross output compared to63% for all manufacturing. Gross value added perperson engaged in drinks is €360K compared to themanufacturing level of €179K and is surpassed by onlychemicals.

In the manufacturing sector administrative andtechnical staff account for 17.1% of employment. Thedrinks industry share is higher, at 21.1%. Drinksmanufacturing jobs are characterised by higherearnings, higher skills and relatively high productivity.Drinks manufacturing provided 4.1% of manufacturingvalue added in 2006 and 2.1% of manufacturingemployment. In 1995 it provided 8.1% ofmanufacturing gross value added, 2.4% of turnoverand 3.3% of wages and salaries.

Economic Contribution and Role

The main indicators of economic role are output andemployment. Associated with these are sub indicatorssuch as type of employment, skills levels and earnings


levels, linkage patterns of the output, regional spreadof economic activity and foreign exchange contributionof the output that is exported (adjusted for importcontent of production). Other economic benefitsinclude the exchequer contribution from the direct andindirect taxes associated with the production andconsumption of beverages. Ultimately the economicbenefits of output and employment frommanufacturing depend on the domestic and overseasconsumption of domestically produced beverages.Therefore, it is desirable to identify consumption levelsand trends. The economic benefits associated withretailing and distribution continue to exist even ifconsumption is satisfied by imported beverages.

Data

The study uses official statistics such as CSOproduction, employment and trade data and revenuecommissioners material on output, consumption andtaxation. In addition DIGI has published data on certainaspects which are not available from official sourcessuch as details of the retail sector. International data onalcohol consumption are from the OECD Database.Except for DIGI research in some significant respects,the main approach is to use official data sources.

Consumption

Beverages are a large but declining component ofpersonal consumption. The voluntary purchase ofbeverages indicates the utility that consumers derivefrom the product. In the current consumer price indexnon alcoholic beverages such as soft drinks and juicesaccount for 1.04% of the total and alcohol accounts for9.98%. Off-licence alcoholic beverages are 3.10% ofthe total and on-licence consumption of alcoholic andsoft drinks is 9.10 (0.39 soft drinks and 8.7 alcohol).Overall, alcohol accounts for 9.98% in the current CPIcompared to 11.90% in the 2001 based CPI.

The CSO National Accounts data on personalconsumption also illustrate the importance of drinksconsumption. Alcoholic beverages consumption wasvalued at €6.6M in 2006, or 8.0% of total personalconsumption. Non-alcoholic beverages were estimatedto be €569M or 0.6%. Overall beverages consumptionwas 9.7% of total consumption in 2000. The alcoholshare of personal consumption, measured in moneyterms has declined from 9.7% in 2000 to 8.0% in 2006.Even with the decline in share the current level ofalcohol consumption is €6.6B. Off licence share grewfrom 28% in 2000 to 36% in 2006

Alcohol consumption measured as per person and peradult peaked in 2001, declined a little in 2002 anddeclined significantly in 2003. Thereafter averageconsumption has broadly remained the same with verysmall annual changes. The current level of per adultconsumption of 13.494LPA places Ireland very close tothe top of the international league table of alcoholconsumption.

It is notable that the current Irish levels of per capitaconsumption(10.75LPA) have previously been exceededby other countries which currently have lower levels.France was at 15 to 17 LPA in the 1960s and 1970sbefore declining to its current 10.3; Germany wasaround 11 LPA in the late 1970s and early 1980s; Italywas above 13 LPA in the late 1960s / early 1970s;Portugal consumed over 12 LPA in the early 1990s andSpain peaked at 14.2 LPA per capita in 1975.

The growth of alcohol consumption has beendominated by wine. Non wine consumption declinedbetween 2001 and 2007 by 3.1% while wineconsumption grew by 66.9%. Total consumption grewby 6.9%.

Employment

There are many different and conflicting sources ofdrinks related employment data. These include FáilteIreland, the Annual Services Inquiry, the Census ofPopulation and the Census of Industrial Production.The 2006 Census of Population reports a total of15727 bar staff, which increased from its 13553 level in2002. The 2006 CIP enterprise section records amanufacturing employment level of 4468 personswhich is lower than previous years(6146 persons in2000). The DIGI 2004 Survey of Licensed Premisesrecords 48K full-time staff and 52K part-time andcasual staff while the 2006 Failte Ireland survey ofpublic houses reports 36175 full-time persons and87998 including part-timers and seasonal workers.The employment contribution of the industry isdominated by the on-licence retail sector.

Employment associated with the drinks industry arisesfrom• direct employment in the manufacture, distribution

and retail segments• indirect employment from the providers of inputs to

the sectors not included elsewhere e.g. fittings andrefurbishment in premises, musicians, foodsuppliers and general services

• the additional employment impact of theexpenditure arising from the incomes from theabove employment.

6

The drinks industry provides opportunities for a varietyof working systems from fulltime to casual.

The linkage employment is significant in that in 2005pubs and other bars bought €803M worth of goodsand services apart from materials bought for directresale. The manufacturing sector bought €1.1B worthof materials and services. Allowing for off-licence andwholesale distribution employment there is an extra4500 jobs. Overall the drinks industry is directly andindirectly responsible for 61600 fulltime job equivalentsand provides employment for 105K persons.

Balance of Payments and Foreign Exchange

Drinks exports were 25% of sales of manufacturers in2005 as reported in the CIP. The 2006 trade statisticsreport beverages exports of €1297M, with a tradesurplus of €571M. Because of the growing level ofinternational competition, the larger non-nationaldemand in Ireland and the markets desire for newbrands the industry has lost market share in Ireland butstill maintains large shares of the 2007 domesticmarket; 63.7% of the beer market; 56.2% of the spiritsmarket and 86.3% of the cider market. Of course, thegrowing wine market is externally sourced.

The net foreign exchange earnings of drinks exportsare relatively high because of the high domesticcontent of both service and materials inputs. In theabsence of domestic production of beer, spirits andcider it is likely that consumption levels would berelatively unchanged and would have to be sourcedthrough imports from other economies. Consequently,the existence of the domestic producers prevents alarge level of drinks imports.

Taxation and Other Aspects

Alcohol is a very highly taxed product in Irelandcompared to other EU economies. Excise amounted to€1078.2M in 2006. This form of taxation is applied tovery few industries. When VAT is included the revenueflow was €2151M per annum in 2006 and €2264M in2007. As of 2007 Ireland had the highest wine tax inthe EU and the second highest spirits and beer tax.The excise size gap between Ireland and many otherEU economies is very wide.

Significant economic benefits flow from the drinksindustry in terms of support for tourism, developing ahigh quality profile for Ireland and regional development.It also provides a resource for community infrastructure,

especially in rural areas. In terms of profile several ofIrelands leading international brands are drinks products,Baileys Cream Liquer, Guiness and Jameson.

Conclusions

The purpose of this report is to identify the economicrole of the drinks industry in Ireland. The intention is tofacilitate those who require such an assessment and toinform and advise policy makers on the role of theindustry so as to contribute to more appropriate andinformed policy making for the industry.

The report’s analysis has shown the drinks industry tobe a substantial national economic asset. It directlyprovides almost 62K full time job equivalents. Thedrinks manufacturing industry has a high serviceemployment multiplier. The drinks industry sourcesmost of its raw materials inputs within Ireland and hasvery high purchases from other Irish sectors.

The manufacturing industry is characterised by highskills, high levels of productivity and high earnings perperson employed.

Alcohol has a very strong balance of payments surplus.The relative foreign exchange earning capacity ishigher than official trade data indicate because of thelow import content of the sectors production.

The industry is a very substantial contributor to theexchequer in terms of excise and VAT, generating atotal tax revenue of €2.151B. In addition the industrygenerates income tax, profits tax and PRSIcontributions.

Many of the high profile international brands that haveemerged from Ireland have been from the drinksindustry. The industry contributes to tourism andregional development. It also plays a significant role insocial infrastructure.

The public house sector also plays an important role inproviding food to foreign tourists. It is the mostfrequently used food service outlet by visitors. 58%used pubs compared to 34% for budget restaurants,31% for hotels and 28% for high quality restaurants.The largest fee charging tourist attraction in thecountry is the Guinness Storehouse.

Overall the empirical data shows that the drinksindustry makes a substantial economic contributionproviding high quality manufacturing employment,large numbers of jobs in retailing and other desirableeconomic characteristics.


Chapter 1

Introduction

8

1.1 Introduction and Objective

This chapter outlines the objective of the report,identifies the structure of the report and describes thedata sources for the analysis.

The purpose of this report is to identify the economicrole of the drinks industry. It updates the 1999 and the2004 DIGI reports which dealt with the same issue.The report seeks to inform policymakers and the publicof the substantial economic contribution made by theindustry. It is also intended as a starting point for thoseseeking more in-depth up to date information on thedrinks industry and on the main data sources. Thedrinks industry is defined to include the manufacture,wholesale distribution and retail distribution of bothalcoholic and non-alcoholic beverages.

The report examines production, consumption,employment, earnings, skills, the impact on thebalance of payments and foreign exchange, taxationcontribution and other issues. It broadly follows thestructure of the 1999 and 2004 (Foley) DIGI reports onthe economic role of the industry. It also updatesinformation available in Foley(2005) on the tourism roleof the industry.

1.2 Economic Benefits

The generally used main indicators of economic roleare output and employment. Associated with these aresub indicators such as type of employment, skills levelsand earnings levels, linkage and purchasing patterns ofthe output, regional spread of economic activity andthe international trade role of drink. Other economicbenefits include the exchequer contribution from thedirect and indirect taxes associated with the productionand consumption of beverages and its contribution totourism. Ultimately the economic benefits of outputand employment depend on the domestic andoverseas consumption of domestically producedbeverages and the domestic consumption of importedbeverages. Therefore, it is desirable to identifyconsumption levels and trends.

Most economic production generates costs as wellas benefits. Direct costs include the negativeenvironmental impact through for example use ofenergy in production and distribution. There are alsonegative indirect effects from various goods such asthe adverse health impact of abuse of alcohol or theobesity aspects of certain food consumptionpatterns

Food production, for example, directly has negativeenvironmental impacts through the manufacturing anddistribution processes and also through the primaryproduction of food involving both the “natural”emissions from animal waste and the discretionary useof fertiliser. Indirectly there are health concerns relatingto obesity, and relating to the salt content of foods.Alcohol is a behaviour altering substance with bothdirect health impact on the consumer if abused andthe indirect effects of inappropriate behaviour ifabused. The Strategic Task Force on Alcohol (2004) hasconsidered the economic costs associated with theabuse of alcohol. As noted above, this report relates tothe economic role or economic benefits associatedwith the production and consumption of alcohol. Adiscussion and measurement of the economic costs ofalcohol abuse is found in the Strategic Task Force onAlcohol(STFA) (2004) and Byrne(2004) and a critique ofthis measurement and approach can be found inFoley(2006).

The STFA estimated that the economic costs of alcoholabuse was €2.65B in 2003. However, Foley(2006)argued that within its own methodology this was anover estimate and that a more likely figure was €1.7B.While recognising the difficulties arising from theexercise Foley also raised questions about themethodology such as the distinction between“associated with” and “ caused by” as regards thealcohol impact on road accidents and crime, socialbenefits of alcohol such as health effects of moderateconsumption and social cohesion, private versus socialcosts and the possibility that reduced abusive alcoholconsumption may be replaced by other abuses.

The report deals with the economic benefits associatedwith the drinks industry such as the employment andoutput associated with production and distribution.The absence of a drinks industry does not necessarilymean an equivalent direct decline in economic activityand employment. Labour and other factors could bereallocated to alternative activities. The consumerexpenditure could be switched to other products andservices, including both domestic and importedproducts. However, this argument can be made for allsources of economic activity. There is also thepossibility that expenditure would not be switchedcompletely to other activities and that economicactivity would decline. Also, it is possible that someconsumption could switch to undesirable productssuch as illegal drugs in the absence of alcoholconsumption. In essence, therefore, the reportidentifies the economic activity and economic benefitsdirectly and indirectly associated with the productionand consumption of alcohol and non-alcoholicbeverages.


1.3 Methodology and Data

The report mainly uses official statistics such as CSOproduction, employment and trade data and RevenueCommissioners data on output, consumption andtaxation. In addition DIGI has published data onaspects of the retail sector which are not available fromofficial sources. Unfortunately the latest DIGIcomprehensive retail data refer to 2003. These will beupdated during 2008. The main source for internationaldata on alcohol consumption in the past has been theWorld Drink Trends but publication of this ceased in2005. Currently, the most up to date data source forinternational alcohol consumption data is the OECDDatabase. Except for DIGI research, Failte Irelandmaterial and market research in some limited respects,the main approach is to use official data sources.

The main data sources are;

Census of Industrial Production(CIP) (CSO): Thelatest comprehensive data is for 2005. There arelimited preliminary data available for 2006. The CIP hasinformation on drinks manufacturing. The level of subsector disaggregation presented has changed fromyear to year in some cases and in 2004 some of thedata was presented only for drinks and tobaccocombined. This approach was reversed in the 2005 CIP.Data is available for both enterprises and localproduction units. An individual enterprise may havemore than one local production units.

Annual Services Inquiry(ASI) (CSO): The latest data isfor 2005. It gives information on various indicators forthe NACE sector, bars.

Expenditure on Beverages (CSO): The latest datarefer to 2006. It gives information on constant andcurrent price expenditure on beverages. The main dataon this indicator is published in the national accountsstatistics and more detailed data is available from theCSO.

Revenue Commissioners: The RevenueCommissioners publish data on volume of alcoholconsumption in their annual Statistics Reports. Thelatest report refers to 2006 but 2007 data has beenmade available by the Revenue Commissioners. Thissource also provides data on taxation and number oflicences.

In addition there are official data on bar sales andinternational trade from the government agencies,some of which is available up to 2007. Failte Irelandpublishes a Business and Employment Survey whichprovides employment data for the public house sector.

The latest available is 2006. Employment data is alsoavailable from the Census of Population.

1.4 Definition of the Drinks Industry

A broad definition of the drinks industry is used in thereport. The manufacture, wholesale, on-licence retailand off-licence retail sectors are included. The mostcomprehensive data is available for the manufacturingsector. Substantial data is available for the on- licensedsector. There is limited empirical data on the off-licenceretail sector and very sparse material is available on thewholesale sector. The varying availability of the data isreflected in the coverage of the different sectors in thereport.

1.5 Structure of the Report

Chapter 2 presents a brief summary of the overallstructure of the drinks industry and examinesmanufacturing and retail output. Chapter 3 deals withconsumption of beverages. Chapter 4 identifies theemployment and labour force aspects, including skills,earnings and productivity. Chapter 5 examines theinternational trade aspects, Chapter 6 deals withexchequer benefits and other economic benefits suchas linkages, purchases and contribution to tourism.Each of chapters 3, 4 and 5 identify data andmeasurement issues arising from the different sourcesof statistics.

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Chapter 2

Structure of theIndustry andProduction


2.1 Introduction

A brief outline of the industry’s structure is presented in this chapter. Inaddition production levels andtrends are identified. The mainfocus is on manufacturing andon the retail segment.Manufacturing data is derivedfrom the Census of IndustrialProduction. Material for theretail segment is obtainedmainly from CSO data sourcesand to a limited extent fromthe DIGI survey on the retailtrade. As will be seen retailingis comprised of severalthousand small establishmentsand accounts for 57K full timejob equivalents compared to4.5K jobs in manufacturing.The average size of drinksmanufacturing unit is relativelylarge compared to total manufacturing.

2.2 Manufacturing; Structure & Production

The manufacture of beverages is covered by NACEgroup 159. There are eight categories in this group,1591, distilling; 1592, ethyl alcohol; 1593, wines; 1594,cider; 1595, non-distilled fermented; 1596, beer; 1597,malt; and 1598, soft drinks and mineral waters. Data isnot available for all the individual categories because ofconfidentiality reasons and some of the categories arenot of relevance in Irish production. The manufacturingdata is now presented for only two sub-sectors(1591,1596,1597) and (1594 and 1598). Up to 1995 inthe CIP data on four categories was provided. The twocategories are; cider and soft drinks in one category andall the rest in the other. In 2006 there were 36enterprises in the drinks manufacturing sector In 2005there were 27 enterprises involved in the manufacture ofbeverages. 13 were in cider and soft drinks and 14 werein the other category. Total manufacturing turnover in2006 was €2.89B or 2.4% of total manufacturingturnover. The industry created €1.609B gross valueadded which was 4.1% of total manufacturing valueadded and paid out €256M in wages and salaries.

The 27 enterprises in 2005 are comprised of 30 localproduction units of which 13 are in cider and softdrinks and 17 are in the other category.

The main structural features are shown in table 2.2.1.

Table 2.2.1Main Structural Features of the DrinksManufacturing Industry 2005

The data are given for the drinks industry, its two CIPcategories for which statistics are available and formanufacturing as a whole for comparison purposes. Inaddition to the indicators which are given here there ismuch more material is available from the Census ofIndustrial Production.

The drinks industry has a larger scale thanmanufacturing as a whole. Gross output and net output per local unit or perproduction establishment is substantially higher in thedrinks industry than in manufacturing as a whole. Thenet output per unit in drinks is more than two and ahalf times that of total manufacturing. The average sizeof local unit is 136 persons in drinks and 48 people intotal manufacturing. Wages and salaries per employeeis almost €54K per annum in the drinks industrycompared to €34K in total manufacturing. Similar gapsarise in respect of average earnings per industrialworker, €43K in drinks and €28K in manufacturing as awhole

The relatively high value added nature of the drinksindustry is illustrated by net output being 66.7% of grossoutput compared to 62.8 for manufacturing as a whole.

Productivity levels, measured by net output per personengaged is a little lower in drinks than inmanufacturing as a whole. €268.8K compared to€296.3K. However, when productivity is measured bygross value added The drinks industry is much higherthan manufacturing as a whole and higher than mostother sectors. This is examined in Chapter 4.

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Beverages Cider & Total Other

Soft Drinks Manufacturing Beverages

Number of enterprises 27 13 4256 14

Number of local Units 30 13 4494 17

Gross output per local unit €M 54.9 21.9 22.9 80.1

Net output per local unit €M 36.6 14.9 14.4 53.2

Persons engaged per local unit 136 94 48 168

Annual wages and salaries per employee € 53781 34441 34342 62024

Annual wages per industrial worker € 42783 30319 28470 54159

Gross output per person engaged € 403214 232471 471597 476287

Net output per person engaged € 268819 158687 296349 315952

Wages and salaries as a % of net output 20.0 21.6 11.5 19.6

Net Output as % of Gross output 66.7 68.3 62.8 66.3

The earnings and productivity data are furtherexamined in chapter 4.

There are substantial differences between the twodrinks sub categories. Earnings are lower in cider andsoft drinks(€34K) than in the other drinkscategory(€63K). Productivity is much lower in softdrinks and cider than in the other category.

The average size of the 17 local units in the otherdrinks category of 168 persons masks the fact that thisdrinks category includes very large enterprises such asDiageo and Irish Distillers. The same is true of theaverage size of 94 persons in cider and soft drinks inthe context of Bulmers.

There are several different measures of output inmanufacturing. As used above there are gross and netoutput. The enterprises section of the CIP uses othermeasures such as turnover and gross value added.Gross value added(GVA) is the concept used for EUwide comparisons. The recent trends in variousperformance indicators are shown in the table below.The material is from the enterprises section of the CIP.For ease of comparison wages and salaries are alsoincluded but this aspect is examined further in chapter4. It should be noted that the enterprises employmentand wages and salaries totals are different to the localunits data. The period covered is 2000 to 2006( for theavailable preliminary data) and 2005. 2004 data are notavailable due to the inclusion of tobacco with drinks.

Table 2.2.2 Production and Other Trends in Drinks 2000-2006

Notable trends are the continuing decline inemployment from 6146 persons in 2000 to 4468persons in 2006 and the decline in the number of localproduction units from 64 in 2000 and 2001 to 30 in2005. Employment is still substantial at almost 4500persons but is lower than in the past. Contrary to thepublic perception of a continually growing alcoholindustry production as measured by GVA is lower in2006 than all of the previous years except 2001. PeakGVA was €2172M in 2003 and is at €1609M in 2006.Turnover reflects a similar pattern. These data refer todomestic production. A major determinant of longterm consumption growth in Ireland has been winewhich is, of course, imported and not included indomestic production figures.

Measured production in the drinks industry is influencedby patterns of outsourcing. If outsourcing increases theproduction attributed to the drinks manufacturing isreduced as it is allocated to the supplying sectors. Whilethere is a general trend of increasing outsourcing thisactivity does not explain the decline in GVA. Purchasinglevel has varied over the period but overall has notincreased greatly between 2000 and 2005 (a 6.9%increase). All of the above data are in current prices. Asprices have increased over the period the volume orquantity changes are less than the value changes.

Over the full period GVA declined by 10.2% but asemployment declined by 27.3% there has been asubstantial increase in labour productivity. The wagesand salaries bill has increased between 2000 and 2006but much of this increase occurred in 2001. However,there was also a large increase in 2006. It should be

noted that the 2006 data arepreliminary and are based onincomplete returns to the 2006CIP. If we stop the comparisonat 2005 the picture remainsmuch the same except that thedecline in GVA is less, the 2005turnover is slightly ahead of the2000 level and the wages bill islower than the previous threeyears. Overall, however, theposition remains one of nogrowth over the full periodalthough some individual yearsdid experience growth in GVA.

The shares of drinks manufacturing in totalmanufacturing for various indicators are shown in Table2.2.3


year Enterprisess Local Turnover GVA Purchases Employment Wages

units €M €M €M Persons and

(In enterprises) salaries

€M

2000 34 64 3086.4 1790.9 1306.9 6146 227.0

2001 34 64 2846.1 1575.6 1281.7 5952 245.6

2002 34 63 3408.6 1968.4 1444.6 5876 253.8

2003 33 54 3483.8 2172.3 1333.5 5223 250.0

2004 na 47 na na na na na

2005 27 30 3114.1 1741.3 1397.6 4542 240.5

2006 36 na 2890.0 1609.0 na 4468 256.0

Table 2.2.3 Share of Drinks in Total Manufacturing 2000-2006

Turnover Gross Wages and Persons

Value Added Salaries engaged

2000 3.1 5.1 3.5 2.4

2006 2.4 4.1 3.3 2.1

The drinks share has declined on all four indicatorsbetween 2000 and 2006. At present the drinks sharesare turnover, 2.4%, gross value added 4.1%, wages andsalaries 3.3% and employment 2.1%.

2.3 Retail & Wholesale Structure and Production

There are several sources of data for the drinks retailindustry. The Revenue Commissioners collect data onthe number and type of licence for alcohol retailing.The Failte Ireland Business and Employment Surveycollects data on the number of public houses and theiremployment. The CSOs ASI contains data on a rangeof economic variables for the bar sector includingearnings, employment, turnover and gross valueadded. The DIGI Survey of Licensed Premises containsthe most detailed breakdown of size structure.Unfortunately the DIGI survey relates to 2003 and itsfindings were reported in the 2004 Economic Rolereport. It is intended to update this data in 2008. In theabsence of more up to date data it is still useful toidentify the size structure from the 2003data. An update of the economicposition of the public house sector isdesirable because of the major changesin their operating environment since2003.

The Revenue Commissioners data onnumber of licences is shown below. Thevery large number of outlets isimmediately apparent. There are 9555full on licences and 1170 full offlicences. The number of off licencesincreased substantially in recent yearsfrom 808 in 2002. The number of wineoff licences is also very large and hasgrown greatly in recent years, from 2023in 2002 to 3485 in 2006.

Table 2.3.1 Alcohol Retail Outlets 2002 -2006

Full publican Full off licences Wine off licences

licences

2002 9896 808 2023

2003 9731 785 2392

2004 9964 983 2790

2005 9237 1070 3026

2006 9555 1170 3485

Source: Revenue Commissioners

According to the 2004 DIGI survey the distribution ofthe full licences was 72.9% public houses and 27.1%were other types of licensed retail outlet. Theseincluded hotels and sports clubs.

The very large number of retail establishments is anotable feature of the on- licence sector. In terms ofnumber of participants the retail segment is verycompetitive. The fact that there are so many retailoutlets in the drinks industry would suggest that theaverage size of establishment is quite small. This isconfirmed by the data in Table 2.3.2 which is from theDIGI retail survey.

Table 2.3.2Percentage of Premises Sales and Employment ineach Turnover Band

Source: DIGI Survey of Licensed Premises in Ireland2004

14

Net Value of Sales Percentage Percentage of Percentage

of Premises Total Sales of Employment

Under €30K 11.0 0.9 5.1

€30,000 – under €60K 15.5 1.8 11.2

€60K – under €200K 27.7 9.4 16.4

€200,000 – under €400K 19.8 15.5 15.1

€400K – under €650K 11.4 15.7 15.2

€650K – under €1M 6.4 13.8 12.2

€1 – under €1.25M 3.2 9.4 7.8

€1.25M – under €2.5M 3.3 16.1 9.2

€2.5M – under €4M 1.0 8.8 3.0

€4M or more 0.7 8.6 4.8

Total 100.0 100.0 100.0

Very large numbers of retail outlets in drink have smallturnover levels. The data show that only 5% ofpremises had sales of €1.25M or over in 2003. Only1.7% had sales levels in excess of €2.5M in 2003.Unfortunately, up to date information from this sourceis not available. The retail segment is characterised bya large number of small outlets and is very much asmall firm industry.

At the lower end of the scale almost 54% ofestablishments have annual sales of under €200K perannum.

Dublin has a higher proportion of public houses in thehigher turnover category than the rest of the country.The Dublin, non-Dublin breakdown is shown below inTable 2.3.3.

Table 2.3.3Net Value of Sales in Public Houses in the LastTwelve Months 2003

Dublin Non- Total

% Dublin % %

Under €30K 0.0 11.8 10.4

€30,000 – under €60K 0.0 15.3 13.4

€60K – under €200K 1.8 32.6 29.0

€200,000 – under €400K 18.6 21.7 21.3

€400K – under €650K 13.9 10.1 10.5

€650K – under €1M 13.2 5.8 6.7

€1 – under €1.25M 16.6 1.5 3.3

€1.25M – under €2.5M 24.0 0.4 3.2

€2.5M – under €4M 9.1 0.4 1.4

€4M or more 2.9 0.5 0.8

Total 100.0 100.0 100.0

Source: DIGI 2004

36% of Dublin pubs have a turnover of, or, in excess of€1.25M compared to 1.3% in the rest of the country.Almost 60% of non-Dublin public houses have aturnover of under €200K compared to 1.8% in Dublin.

The ownership structure is a family dominated one. 95%of pubs are independently or family owned andoperated. Only 5% are part of a chain. The drinks sectoris a substantial source of entrepreneurial resources.

Data on the wholesale and cash and carry segment ofthe industry is limited. However the 2004 DIGI surveyprovides an insight into its role. The main suppliers ofeach category of drink is shown below.

The dominant source of supply, excluding draughtbeer, is wholesalers. General “cash and carry” can alsobe regarded as a “non specialist” wholesaler.Packaged beer is mainly sourced at wholesalers(68.4%), while draught beer comes directly from themanufacturer or importer (74.8%). Spirits and wine aresupplied primarily by wholesalers and cider and perrycomes mainly from wholesalers (64.6%). Soft drinks aremostly supplied by wholesalers (77.4%).

Table 2.3.4Main Supplier of Stocks for each Category of Drinkto Licensed Premises % 2003

Source: DIGI 2004

The ASI collects data on the number of bars as definedby the NACE economic classification. The numberreported in this source is very much lower than theRevenue Commissioners data for full publican licences.The latest data refer to 2005. The 2005 ASI records atotal of 5784 bars with a combined turnover of€3648.7M which gives an average of €631K per bar.Average employment including part-timers accordingto the ASI is 7.2 persons which further illustrates thesmall firm nature of the on-licence retail sector.Average full-time staff per public house is 4.3 andaverage part-time staff is 2.9 according to the ASI.Using Failte Ireland statistics the average pub sizeincluding seasonal and part-timers is 9.5 ; using onlyfull-timers the average size is 3.9. The DIGI averagefull-time staff is 3.7 persons and including part-timersthe average is 7.7. While there are differences inaverage size depending on the source of informationall three sources confirm the small average size oflicensed premises.


Drink Cash Wholesaler Manufacturer/ Not Total

Category & Carry Importer Applicable

Beer 8.2 68.4 20.1 3.3 100.0

(Packaged)

Beer (Draught) 0.6 21.9 74.8 2.7 100.0

Spirits 25.8 57.1 15.2 1.9 100.0

Wine 19.5 70.9 8.8 0.8 100.0

Cider/Perry 9.1 64.6 22.6 3.7 100.0

Soft Drinks 11.3 77.4 10.1 1.2 100.0

The average size of bars/public houses from thedifferent sources is shown in Table 2.3.5

Table 2.3.5 Average Size of Public Houses: Persons Employed

Full-Time Part-Time Total Staff

ASI 2005 4.3 2.9 7.2

Failte Ireland 2006 3.9 5.6 9.5

DIGI 2003 3.7 4.0 7.7

Source: Derived from various sources

Non-alcoholic beverages were 7.9% of the drinksmarket in 2005, based on expenditure.

The relatively dispersed nature of the retail drinksindustry is further illustrated when compared with otherretail outlets. The 2005 CSO Services Inquiry containsthe data for this comparison. The number ofenterprises in the “bars” category is the highest of theretail categories, except for the catch-all category of“other retail” indicating the relatively high degree ofactual or potential competition.

Table 2.3.6Number of Retail Enterprises 2005Motor Trades 5341

Non-specialised stores 3291

Specialised food & beverages 1964

Pharmaceuticals, Medical, Cosmetics 989

Other retail including clothes, hardware, 9003

books, electrical, furniture

Repairs 762

Bars 5784

Source CSO

The “bars” category of retail sales generated €1055Mgross value added in 2005. This is equivalent to 2.3%of all ASI services gross value added. Bars accountedfor 3.7% of ASI full time retail services employees and8.9% of part-time employees. Non-alcoholic beverageswere 7.9% of the drinks market in 2005, based onexpenditure

The off-licence sector is also characterised by small sizeand large numbers of enterprises. There are over 1170stand alone off-licences and 3485 wine licences. Inaddition full pub licences can operate an off-licencefacility. Research by Foley (2000) showed that averagefull time employment per off-licence was 3.7 persons.In recent years the role of the multiple sector and theconvenience store sector in off licence sales hasincreased.

2.4 Summary of Structure and Production

The retail segment is compromised of very many smallenterprises. Relatively small numbers of licensedpremises have what would be regarded as high levelsof turnover. Pubs outside Dublin have much lowerturnovers than pubs in Dublin. Large numbers of non-Dublin pubs have very low turnover levels. Themanufacturing segment is comprised of 34 productionestablishments and 27 enterprises. Average size ishigher than in manufacturing as a whole and earnings,productivity and value added ratios are also relativelyhigh. Apart from draught beer, wholesalers are themain source of supply for licenced premises. There are9.5K on-licensed premises and 1170 off-licences. Theoff-licence segment accounts for about 36% of thealcohol market as measured by expenditure. Thisunderstates its volume share as price per alcohol unitin off-licences is lower than in on-licenses. Theseconsumption aspects are examined in chapter 3. There are very many “bars”. There are more outlets inthe bars category than the other retail segmentsreported in the Services Inquiry except for the “catchall” category of “other” retail. The retail sectorprovides the economy with a large pool ofentrepreneurial resources.

16

Chapter 3

Consumption ofAlcohol and NonAlcoholic Beverages


3.1 Introduction

Consumption of beverages by consumers is thefoundation for the economic benefits of employment,income and wealth creation which are associated withthe drinks industry. This chapter examines the mainfeatures of consumption; international comparisonsand trends in alcohol consumption; consumerexpenditure, product mix and the on and off-licencesectors of the retail category. The next section reviewsthe various measurement issues which arise in alcoholconsumption. The important but simple chain ofcasuality is that consumer demand generates a desirefor consumption which encourages production (bothmanufacture and distribution) which leads toemployment, income and other economic benefits.Abuse of alcohol consumption is associated witheconomic costs as discussed in the introduction. Aswith almost all economic activity, production, and evenmoderate consumption, generate economic “bads”.

Consumption does not directly lead to Irishmanufacturing employment and economic output. Theconsumption can be satisfied by imports as well asdomestic production. As will be shown below much ofthe consumption growth has been generated by winewhich is imported. In addition, as outlined in Chapter5, a growing share of beer, cider and spiritsconsumption is imported. Increasingly there is adivorce between overall consumption trends in alcoholand manufacturing performance because of imports.

3.2 Data Sources

As alcohol consumption is an important policy issue itis desirable that empirical measurement ofconsumption should be solidly based. For example,up to WDT 2002, the Irish data calculated by WDT wasan overestimate due to including cider consumption atwine strength; this was corrected in WDT 2003.

The Economist “World in Figures” presentedmisleading expenditure data on Irish alcoholconsumption relative to other countries. The 2004edition identified Irish alcohol consumption at $1,335.5per head. This was the highest in the world andexceeded the combined levels of Finland, Norway andDenmark (ranked 3,4,5 in the “league” tables). InIreland, on-licence sales are allocated to “alcohol” inthe national accounts but in many European countriesonly off-licence sales are allocated to alcohol and pubsales are allocated to categories such as recreation,entertainment or restaurants. Consequentlyexpenditure measures based on national accounts datacan be misleading.

There are other issues which affect the measurement ofalcohol consumption and there are different methodsof calculation. It can be measured in terms of quantityof beverage, quantity of alcohol content, expenditurein monetary terms, inclusive or exclusive of tax, in percapita or in per adult terms. It may or may not allow forthe impact of out of state legal and illegal sourcing andcalculation may or may not allow for the impact oftourism on consumption. Conversion of beveragelevels to alcohol content in some cases requires theuse of average alcohol content ratios which may beless than perfect.

Trends in alcohol consumption are influenced both byincreased levels of consumption for a given categoryand by demographic changes without increasedconsumption in specific age/gender groups and bychanges in tourism levels. For example, an increase inthe share of a high consuming population cohort wilincrease average consumption levels without anyincrease in each cohorts consumption levels.

There are many difficulties associated with meaningfulmeasurement of alcohol consumption. The more usualand robust method is to measure pure alcoholconsumption per person or per adult. The main sourceof this data in Ireland is the statistics collected by theRevenue Commissioners. As excise is to be paid on theproduct complete records are kept of ex bondmovements. However many European countries do notcharge excise on wine. Therefore the issues of underreporting and inaccuracy of measurement arises.

The volume of alcohol contained in beverages is abetter measure of trends or international comparisonsthan monetary indicators such as sales or expenditure.Depending on tax content and price levels sales datacan give wrong impressions of relative alcoholconsumption. Ireland is a very high tax location andthere is also evidence of relatively high labour andother operating costs compared to other EUeconomies (Forfás 2002 and NCC 2007). Therefore,Ireland could have the same volume of alcoholconsumption as another country which has lower taxesand lower operating costs but on a sales/expenditureindicator Ireland would have a higher alcoholsales/expenditure per capita level than the lower taxeconomy.

Excise on beer is charged per litre of pure alcohol.Therefore the Revenue Commissioners collect andpublish data on pure alcohol content of total beerconsumption. The same is true of spirits. Excise on wineis changed depending on the range of the alcoholstrength of the wine. Consequently the wine data refersto litres of beverages. This must be converted by an

18

average alcohol content to get the quantity of purealcohol. The international conversion rate is usually 12%.However, the WHO has used 14% for wine and 4.5% forbeer. This 12% conversion rate may overstate orunderstate the true alcohol content. Revenue cider datais published on the same basis as wine. The conversionfactor for cider that is often used internationally is 4.2%..Internationally a 4% beer rate is often used.

If the average alcohol content of wine consumed inIreland is above 12% and if the alcohol content of cideris above the conversion rate used, the Irish data wouldunderstate the real alcohol consumption. If the actualcontents are below the above conversion factors theIrish data overstate the real consumption. Based ontrends in the market it seems more appropriate to basefuture wine beverage to alcohol conversion on a 12.5%content. This reflects the increased share of higheralcohol content wines in consumption.

DIGI has traditionally used a 5% alcohol level for cideralcohol consumption levels. The dominant brand inIreland is 4.5% but other ciders have between 5% and6%. A 4.5% level would understate actual alcoholconsumption. The likely actual level is around 4.8%.

The above considerations relate to recorded or knownconsumption levels. The data lose much of theirmeaning if there is large unrecorded consumption.Both legal (personal) and illegal out of state sourcingcan arise. People also consume alcohol while abroadon holidays and this quantity is not included in thenational estimate of average consumption. In the sameway foreign holidaymakers in Ireland consume some ofthe alcohol attributed to Irish residents in estimatingnational consumption levels.

International practice is to treat the 15 years and overpopulation as the adult population even though thelegal minimum age for purchasing alcohol is 18 years.The report also presents revised estimates for 2003,2004 and 2005 to those which have already enteredthe public domain to take account of the recentlypublished CSO revision of population estimates forthese years. In addition two measures for 2006 arepresented to take account of the CSO decision topublish population estimates for 2007 based on the“usually resident” criterion instead of the previouslyused “de facto” population. The two measures allowthe linking of the per capita and per adult consumptionseries through the two calculations for 2006.

Per capita and per adult consumption indicators areespecially important for policy purposes. The measuresare derived from population levels and volume ofalcohol consumption. It is desirable to clarify thesources and nature of each. The difference between the 2006 “de facto” and“usually resident” populations is small. Usually residentpopulation in 2006 was 99.8% of the de factopopulation. However, changes in annual per capitaconsumption have been very small in some recentyears and inexact measures of population can presentan incorrect picture of actual per capita and per adultconsumption changes and directions of change.

The CSO Annual Population and Migration Estimatesfor 2007 were published in December 2007. Theseestimates presented new totals and age distributionsfor 2003 to 2005 to allow for the 2006 Census ofPopulation final population which was a little higherthan the preliminary total which had already been usedto estimate 2003 to 2005 in the 2006 AnnualPopulation and Migration Estimates ( published inSeptember 2006). The 2002 population is unaffected bythis as it was based on the 2002 Census Of Population.The current and previous estimates of population for2002 to 2007 are summarised in Table 1. Column 1refers to the CSO estimates published in September2006 and these include the preliminary 2006 Censustotal. Column 2 refers to the CSO estimates publishedin December 2007 and include the final 2006 Censustotal. The new definition of usually resident are includedfor 2006 and 2007. Column 3 refers to previous DIGIpopulation estimates for 2003 to 2005, published in theDIGI Statistical Handbook in June 2007 to adjust forthe higher final 2006 Census total pending the CSOrevisions. As can be seen the DIGI estimates are veryclose to the eventual finalised CSO estimates.


Table 3.2.1Different population estimates for 2001 to 2007

CSO Estimates DIGI Estimates

Published Published Published

Sept 2006 Estimates June 2007

Dec 2007

2001 3847.2 3847.2 3847.2

(not included in

2007 estimates)

2002 3917.21 3917.21 3917.21

2003 3978.9 3979.9 3979.9

2004 4043.8 4045.2 4045.8

2005 4130.7 4133.8 4134.0

2006 (de facto) 4234.92 4239.83 4239.82

2006 (usually resident) 4232.9

2007(usually resident) 4339.0

1 2002 CP 2 Preliminary 2006 CP 3 Final 2006 CP

The data in column 2 are used to calculate the percapita consumption indicators in this paper. The adultpopulation figures used in the calculation of the peradult consumption indicators are derived from thecolumn 2 total populations and are published in thesame sources. It is clearly important to use the correctpopulation changes in deriving changes in per capitaconsumption. If the 2007 and 2006 populations on theusually resident definition are compared, there is anincrease of 2.51%. If the 2007 usually residentpopulation is wrongly compared with the 2006 de factopopulation the increase is 2.34% and implies a higherper capita consumption increase that using the correctpopulation change.

It is notable that official timely data on the level,distribution and pattern of consumption is relativelypoor given the policy concern with the consequencesof alcohol misuse.

3.3 International Comparisons ofConsumption

The analysis uses the” litres of pure alcohol”(LPA)measure of consumption.

The latest (OECD Database) international comparisonsare shown below. The sample of countries is thehighest per capita consumers from the last WDT in2004. The Irish levels are from the OECD source. TheOECD data for Ireland for 2000 and 2005 are slightly

different from Irish estimates based on RevenueCommissioner data. For the sample of countries in theinternational comparisons we use the WDT highconsumers for 2001 as published in the 2004 DIGIeconomic role report. The data are the latest OECDDatabase information which refers to 2003, 2004 or2005 depending on country.

Table 3.3.1International Comparisons of Consumption (Top 11countries from WDT 2004) 2003-2005

Consumption Per Consumption Per

Adult LPA 2000 Adult LPA

(OECD Database) 2003, 2004

(OECD Database) or 2005

Luxembourg 15.4 15.5

Hungary 12.0 13.2

Czech Republic 11.8 12.0

Ireland 14.2 13.5

Portugal 12.9 11.4

France 14.0 13.0

Spain 11.5 11.7

Germany 10.5 10.0

Denmark 11.5 11.3

Austria 11.1 11.1

UK 11.4 11.3

Source: WDT 2004 and OECD Database 2007

The OECD estimate of 14.2LPA per adult puts Irelandinto second place in 2000 behind Luxembourg andclose to France. In 2003/05 Ireland retained the sameposition. Between the two periods Irish per adultconsumption declined as did five other countries.However, per adult consumption increased inLuxembourg. Hungary, Czech Republic and Spain.Consumption was unchanged in Austria.

Irelands recent(since the mid 1990s) and current highleague position on alcohol consumption is a departurefrom its pre 1990S long term position.The 1996 National Alcohol Policy reported that Irelandranked 11th in 1993 in the EU based on per capitaalcohol volumes of consumption. It also noted thatunlike most other EU economies alcohol consumptionwas increasing in Ireland. It referred to the fact thatusing alcohol per adult would increase Ireland from11th to 8th in the country “league.” NonethelessIreland was ranked a relatively low 11th or 8th (of 15countries) in 1993.

20

The 1993 ESRI report also concluded that alcoholconsumption was low in Ireland “Clearly, intake ofalcohol per head (in Ireland) is relatively low and ranksamong the lowest in Europe…” (page 33). As notedabove that situation no longer is the case.

While Ireland is near the top of the international leaguetable for alcohol consumption, its current level is belowthe maximum levels experienced previously incountries which are now below the Irish level

Table 3.3.2Maximum Levels of Per Capita Consumption:Various Countries

Highest LPA per capita Period

Portugal 14.3 1971

Belgium 10.8 1982/3

France 16.0 to 18.0 1962-76

Spain 14.0 1978

Germany 11.7 1976

Italy 13.9 1973

Ireland 11.3(2001) 2001/2

Austria 12.2 197.3

The seven countries listed above all have currentconsumption levels below the Irish level, but six ofthese had consumption levels above 11.3LPA, the Irishmaximum per capita, at various times in the past.Excluding Belgium, the maximum consumption levelsranged between 11.7LPA to 18.0LPA.

3.4 Trends in Consumption

The consumption trends examination is divided into twoperiods, the long term trend up to 2001 using a 12% winealcohol volume and the period 2001 to 2007 using a12.5% wine alcohol volume which is a more accuratecurrent estimate of the alcohol content of wineconsumption. 2001 is the common year to provide a linkbetween the two wine estimates. It is also the year ofpeak consumption and is therefore a good referencepoint. As already noted the current(2007) populationdefinition is different to previous measures and the 2003to 2005 population levels have recently been revised.Consequently. Previously published estimates of averagealcohol consumption have had to be revised and greatercaution than usual is needed in using the population data.

Alcohol consumption per person has (in volume terms)grown greatly over the late 1990’s. Between 1990 and1995 per capita consumption grew by 8.3%. In the

1995/2000 period the increase was 28.3%. These arebased on the Revenue Commissioners data.

Part of this increase was due to an increased share ofadults in the population. Adult consumption up to1995 grew by 4.1%. In the second five years growthper adult was 24.1%.

In 2001 alcohol consumption per capita and per adultwere at their peaks.. Both declined in later years. Theannual details for 1990 to 2001 are shown below.

It is clear that the rapid growth was in the mid to end1990’s. When the individual annual performances areidentified it can be seen that per adult growthdecelerated from 1999 and was negative after 2001.The per capita consumption followed the samepattern. The rapid consumption growth coincided withthe excellent economic growth and employmentperformance, rapidly rising incomes, an increasinglyliberal society and greatly enhanced gender equalityand increased female labour force participation.

Table 3.4.1Annual Growth in Per Adult Consumption and Per

Capita Consumption % 1990-2001

Per Adult % Level Per Capita % Level

1990 n.a. 10.90 n.a. 7.93

1991 0.4 10.94 1.1 8.02

1992 2.7 11.23 3.4 8.29

1993 -2.7 10.93 -2.1 8.12

1994 0.9 11.03 1.8 8.27

1995 2.9 11.35 3.7 8.59

1996 6.3 12.06 7.1 9.20

1997 5.4 12.71 6.3 9.78

1998 2.5 13.03 3.3 10.10

1999 4.8 13.66 5.2 10.63

2000 3.1 14.09 3.7 11.02

2001 2.1 14.38 2.5 11.30

Source: Derived from Revenue Commissioners and CSO

The total volume growth between 1990 and 1995 was11.2%. In the 1995-2000 period the growth was 35.0%.Between 2000 and 2007 total volume grew by a muchlower rate of l0.8%. The 2000 to 2005 growth was 5.2%.

The data used to calculate the per capita and per adultconsumptions for the 2001 to 2007 period are shownin Table 3.4.2.


Table 3.4. 2 Total and adult population, total alcoholconsumption and per capita and per adultconsumption 2001-2007

Source. Population from CSO Population andMigration Estimates and Census of Population. Alcoholconsumption up to 2006 from Revenue CommissionersStatistics Reports and 2007 alcohol data is supplied byRevenue and is provisional.

While the general trend between 2001 and 2007 is oneof decline or stability it has not been a uniformprocess. Per capita and per adult consumptionincreased slightly in 2004.

Based on the above methodology and data the totalvolume of alcohol increased by 2.58% in 2007compared with 2006. Population grew by 2.51% andadult population grew by 2.59%. Therefore, per capitaconsumption increased slightly in 2007 and per adultdeclined by a very small amount. Per capitaconsumption grew by a small amount, 0.07% from10.738 litres of pure alcohol(LPA) to 10.746 LPA. Onthe more usual convention of using two decimal placesto present the consumption figures the per capitaconsumption was 10.74LPA in 2006 and 10.75LPA in2007, an increase of 0.09%. Overall the 2007 averageconsumption continues the relative stability of recentyears and remains well below the peak levels of 2001and 2002. The 2007 figure is not directly comparablewith the 2001 (and pre 2007 levels) because of thechange in population definition. The 2006 “de facto”population average consumption is 10.720LPA. The2006 “usually resident” population averageconsumption is 10.738LPA. If the 2007 usually residentpopulation measure of 10.752LPA is adjusted by the

ratio of the two 2006 measures an estimate of 2007de facto population consumption is 10.728LPA whichis 5.3% below the 2001 level.

The per adult consumption decreased by asmall 0.01% from 13.495 LPA to 13.494LPAbetween 2006 and 2007. When averageconsumption is measured to two decimalplaces there is a decline from 13.50 to 13.49between 2006 and 2007. The highest peradult consumption recorded was in 2001with a level of 14.44LPA. When the 2007usually resident average consumption isconverted to a de facto population estimatethe 2007 figure is 13.464LPA which is 6.8%below the 2001 peak.

3.5 Consumer

Expenditure on Beverages

Alcohol in a substantial part of consumerexpenditure but its share has been

declining. In the consumer price index the combinedon and off-licence alcohol expenditure has a currentweighting of 9.98% of the total index compared to11.90% in the Dec 2001 weighting. This is comprisedof 2.87% off-licence and 7.11% on-licence. Both ofthese figures have declined since 2001. Soft drinks andjuices account for 1.04% giving a total beverages(excluding milk, tea, coffee) weighting of 11.02% of thecurrent CPI compared to 13.32% in 2001.

Table 3.5.1Beverages % Weighting of Drinks in ConsumerPrice Index

Dec 2001 Dec 2006

Soft Drinks & Juices (off lic. sales) 1.03 0.70

Alcohol (off lic. sales) 3.19 2.87

Soft drinks (on lic. Sales) 0.39 0.34

Alcohol (on lic. Sales) 8.71 7.11

Total Alcohol 11.90 9.98

Total Soft Drinks 1.42 1.04

Total Beverages 13.32 11.02

Source: CPI, CSO

National accounts data from the CSO also show theimportance of beverage expenditure in total consumerexpenditure. The alcohol share of personalconsumption has declined in recent years. It was 10.9%in 1997 compared to 9.7% in 2000 and 8.0% in 2006.

22

Population Adult Pop Alcohol Per Capita Per Adult

000s 000s Consumption Alcohol. Alcohol.

MLPA Consumption Consumption

LPA. LPA

2001 3847.2 3019.7 43.604 11.334 14.440

2002 3917.2 3089.8 44.300 11.309 14.337

2003 3979.9 3145.2 42.350 10.641 13.465

2004 4045.2 3201.4 43.527 10.760 13.596

2005 4133.8 3280.4 44.302 10.717 13.505

2006 4239.8 3375.4 45.451 10.720 13.465

2006 4232.9 (usually 3367.9 (usually 45.451 10.738 13.495

resident) resident)

2007 4339.0 (usually 3455.2 (usually 46.625 10.746 13.494

resident) resident)

Table 3.5.2Personal Expenditure on Alcohol & Non-AlcoholicBeverage

Source CSO, National Accounts

While alcohol expenditure rose by 32.7% between 2000and 2006 overall personal expenditure on consumptionrose by 60.2%. The alcohol share of total consumptiondeclined from 9.7% to 8.0%. Non-alcoholic beveragesshare declined from 0.9% to 0.6%. Overall beveragesshare declined from 10.6% to 8.7% between 2000 and2006. At present, however, almost €9 of every €100consumption expenditure goes on beverages. Almost€7.2B was spent on beverages in 2006.

A further illustration of the size of alcohol expenditurecan be obtained from the Services Inquiry. Off-licencedata are not available but bar turnover (excluding VAT)was €3649M in 2006.

The growth rates of different consumption sectors overthe 2000/06 period are shown below.

Table 3.5.3 Growth of Alcohol Consumption Relative to OtherSectors 2000-2006Consumption sector Average annual % increase

2000/06

ALCOHOL 4.8

FOOD 2.6

TOBACCO 1.0

CLOTHING 2.4

HOUSING 9.8

FUEL and POWER 9.3

HOUSEHOLD EQUIPMENT 7.5

TRANSPORT AND COMMUNICATION 8.9

MISCELLANEOUS GOODS and SERVICES11.1

ENTERTAINMENT 8.6

EXPENDITURE OUTSIDE the STATE 13.6

TOTAL 8.2

Expenditure on beverages (mainly alcohol) is asubstantial share of the CPI, personal consumption andretail turnover. Its shares of the CPI weighting and of

personal consumption have declined overthe past several years.

3.6 Product Categories

The product breakdown for alcohol, basedon value of expenditure is shown below for2000 and 2006.

Table 3.6.1 Alcohol Product Shares 2000-2006(expenditure)

Total Beer Spirits Wine & Cider

2000 €M 4996 2962 1105 929

% 100 59.3 22.1 18.6

2006 €M 6640 3446 1533 1661

% 100 51.9 23.8 25.0

Source: CSO National Accounts

Beer had 59.3% of the market (in value terms) in 2000.This had declined to 51.9% in 2006. The spirits shareincreased slightly and the wine/cider share increasedgreatly. A breakdown of the wine/cider expenditurecombination is not available. One of the economicimplications of the changing product pattern is thatwine is an imported product without a domesticproduction capability. Beer, cider and spirits havedomestic production capabilities. Wine also tends tobe a much more of a home and restaurant consumedproduct than a public house/bar product although it isa growing element of sales in many pubs.. The 2000-2006 trend continues a longer term trend of wine shareincreases.

An alternative measure of product mix is available fromthe volume data produced by the revenuecommissioners

Table 3.6.2Volume Levels & Shares by product 2001/07

Source: Derived from Revenue Commissioners data


€M Alcohol as Total Non Alcohol Non alcohol

Alcohol % of total Expenditure €M as % of

expenditure total

expenditure

2000 4996 9.7 51474 451 0.9

2006 6628 8.0 82483 569 0.6

% increase 32.7 60.2 26.2

Beer Spirits Wine Cider Total Total

excluding

wine

2001 LPA (M) 23.935 9.312 6.224 4.133 43.604 37.380

% of total 54.9 21.4 14.3 9.5 100 85.7

2007 LPA (M) 22.895 9.275 10.390 4.064 46.625 36.235

% of total 49.1 19.9 22.3 8.7 100 77.7

Beer share dropped from 54.9% to 49.1% over the2001 to 2007 period. Spirits share also declined overthe period as did cider. The wine share increased. Thewine share grew from 14.3% to 22.3%. It is notable thatthe total alcohol consumption volume excluding winedeclined between 2001 and 2007. It is also notablethat all three of the products which are capable ofbeing produced in Ireland declined in volume in thisperiod although there were fluctuations within theperiod and some of the declines are small. The reasonfor identifying the non-wine performance is that wine isimported and is generally not capable of beingproduced in Ireland. Therefore its increasing share hasdifferent economic implications than would derive fromincreases in the other three product categories.

3.7 Off and On Licence

The details of the on and off licensed segments areshown below for 2006.

Table 3.7.1 On and Off Licence Share 2006 (Expenditure)

Beer Spirits Wine & Total

Cider

On €M 2954 904 415 4274

% 85.7 59.0 25.0 64.4

Off €M 492 629 1246 2366

% 14.3 41.0 75.0 35.6

Total 3466 1533 1661 6640

Source: Derived from National Accounts Data

The off-licensed market is 35.6% of the total alcoholmarket measured in money terms. Only 14.3% of beeris sourced within this segment. 41% of spiritsexpenditure is sold through off-licences. 75% of thecombined wine and cider segments is sold through off-licences.

The off-licence share of the alcohol market in monetaryterms has grown from 19.1% in 1991 to 27.5 % in 2000and 35.6% in 2006.

The off-licence share measured by expenditureunderstates the volume of alcohol consumptionsourced from off-licences. This is because the unit ofalcohol price is lower in off-licences than in bars. Thegap between spirits and wine (which are the main off-licence products) off and on prices is wider than inbeer prices. The average alcohol off-licence pricescould be about a quarter of the on-licence alcoholprice. This significantly boosts the off-licence volumeshare above the 36% value share. Clearly, the relativeshares of on and off licensed categories haveimplications for the employment and tax revenueintensity of alcohol consumption.

3.8 Summary of Consumption

Irelands alcohol consumption is at or near the top ofthe EU alcohol consumption league. However, manycountries which currently have lower per capitaconsumption levels than Ireland had higher levels inthe past. There are many difficulties in measuringconsumption but even when these are taken intoaccount Ireland is a relatively high consumer. Per capitaconsumption rose rapidly in the 1990s and peaked in2001. It declined slightly in 2002 and declined again in2003 and has been broadly stable at that level since.Beverages account for 11.02% of the CPI and 8.6% ofpersonal consumption expenditure. Beer accounts for49% of the market and has a declining share. Wine’sshare has increased greatly and cider’s share has alsoincreased. CSO data show off-licences to have 35.6%of the market based on expenditure. This understatesthe off-licence share in volume terms. Three drinkscategories are produced in Ireland, beer, spirits andcider and wine is imported. Between 2001 and 2007total non-wine alcohol consumption declined and wineaccounted for all the growth. Given the concern withalcohol consumption it is surprising that official data onthe level and pattern of alcohol consumption is solimited.

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Chapter 4

Employment


4.1 Introduction

This chapter deals with the employment aspects of thedrinks industry. It identifies the level and type ofemployment provided by the industry. Skills aspectsand productivity levels are examined and absolute andrelative earnings are also identified.

Data on the manufacturing segment is comprehensivebut data on the licensed premises element is morelimited. The Census of Industrial Production (CIP) andother CSO data series deal with the manufacturingsegment but the only official recent sources of retailsector employment are the services Inquiry and theCensus of Population. Unofficial retail sector data isavailable from the DIGI survey and the Failte Irelandsurvey. Overall however there is sufficient informationto give an accurate measure of the employmentsupported by the drinks industry.

4.2 Employment

Direct employment is provided in the manufacture anddistribution of beverages. Indirect employment isprovided within Ireland through the purchases by themanufacturing and distribution segments from otherfirms. For example refurbishment of public housesprovides employment in the construction and furnituresectors. The drinks manufacturing segment has a highlevel of domestically sourced raw materials whichsupports employment in primary agriculturalproduction.

Employment creation also arises through the spendingpower of the incomes generated by the economicactivity caused by the production and distribution ofdrinks industry products.

The overall employment impact of the drinks industryextends beyond its direct employment. It has asubstantial employment multiplier impact. There isinterdependence with other sectors in that drinksproduction arises only because of purchasing byindividuals. This purchasing is possible mainly becauseof incomes generated by other sources of economicactivity in the Irish and international economies.Therefore other sectors could argue that they supportemployment in the drinks industry.

A distinction should be made between employmentassociated directly and indirectly with the drinksindustry and any concept of causality, or “stand alone”nature of the industry’s employment.

On the assumption of the continuation of the samedemand to consume alcohol in the absence of an Irishdrinks manufacturing industry the market will besupplied by imports. This would remove the directemployment in manufacturing and the indirectemployment generated by the manufacturer’spurchases of Irish services and raw materials. The retailand wholesale distribution employment would besustained even with all consumption satisfied byimported products. There would be a deterioration inthe balance of payments caused by increased importsand lost exports.

This chapter focuses on direct employment. Linkageand purchases induced employment is discussed inChapter 6.

The principal employment contribution arises from theretail distribution segment. As shown in previous DIGIreports the employment in manufacturing of drink hasdeclined over the long-term as restructuring,improvements in productivity, outsourcing andtechnological change have occurred. This has beenrepeated throughout the manufacturing base. Longterm employment growth in manufacturing has tendedto arise from new sectors, rather than the growth oflong established sectors and enterprises.

Manufacturing employment is examined first. The CIP isthe main sources of data on manufacturing employment.The previously published more up to date quarterlyenquiries by the CSO are no longer published.

There are some issues in interpreting the employmentperformance from the CIP. As noted there are twodefinitions of unit of production, local production unitsand enterprises. Between 2000 and 2002 both sourcesreported broadly the same employment levels asshown in Table 4.2.1. In 2003 the two sources ofmanufacturing employment diverged with theenterprises total 7.7% above the local units total, 5223persons compared to 4851 persons. The gap continuedand widened in 2005 4542 persons compared to 4084persons, a gap of 18.6%. There was no enterprisesemployment data for beverages as a group in 2004due to tobacco being included. As also shown in thetable the difference between the two sources on thebeer/spirits and cider/soft drinks classifications are notconsistent over the period. The beverages gap in thetwo sources in 2003 was due to the beer/spirits categorywith 3007 persons compared to 3380 persons.Cider/soft drinks was almost the same in the twosources. In 2005, however, beer/spirits were almost thesame in the two sources (2860 persons compared to2901 persons) and cider/soft drinks accounted for thegap, 1641 persons compared to 1224 persons.

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These somewhat unlikely patterns emerging from theCIP merit further examination and this is being pursuedwith the CSO. Both sources point to a declining levelof employment in the manufacture of drinks.

Table 4.2.1 Differences in Employment Totals in the Local Unitsand Enterprises Parts of the CIP 2000-2006 persons

The latest CIP covers 2005 with preliminary data for2006. . There were 5871 persons engaged in themanufacture of beverages in 2002 according to thelocal units classification of the CIP. According to theenterprise classification there were 5876 personsengaged. Over the longer term manufacturingemployment declined from over 8000 persons in 1980to 4741 in 1990. It fluctuated between then and 1998(4732 persons). Thereafter it increased to 6146 personsin 2000 but as already noted it declined each year from2000 to 2006. The rate of decline in drinksmanufacturing employment was 27.3% between 2000and 2006.

Peak employment in drinks manufacturing in the pastdecade was 6146 persons in 2000 and prior to that8088 persons in 1980.

Over the 2000-2006 period total consumption ofalcohol increased by 8.0% which would not seem toindicate a substantial decline in employment evenallowing for productivity gains. However, theconsumption increase is not a good guide tomanufacturing employment performance because all ofthe increase was in wine between 2000 and 2006.Non-wine consumption declined and as shown inChapter 5 the domestically produced part of non-wineconsumption declined substantially.

The 4468 persons in 2006 amounted to 2.1 % of totalmanufacturing employment.

Employment in retail distribution is now examined.There are four separate sources. The Census ofPopulation (CP), the Annual Services Inquiry, the DIGIsurvey and Failte Ireland. The CP material refers to2006, DIGI to 2003, ASI to 2005 and Fáilte Ireland to

2006. The DIGI and Fáilte Irelandsurvey provide broadly compatibledata except that DIGI refers to alllicensed premises and Failte Irelandrefers to public houses. Bar activitiesin hotels are covered in separatehotel data by Failte Ireland but bothof these diverge from the CP data.As the DIGI data refers to 2003 andthe other sources are more up todate the emphasis is on these latersources. The main features of thedata are summarised below.

Table 4.2.2Employment in Retail Distribution of Beverages

Persons

1. Census of Population 2006 24245

Occupation volume

• Bar Staff - 15727

• Publicans, innkeepers,

club managers – 8518

2. Fáilte Ireland 2006 87998

Employment in Licensed Premises-

Public Houses

Full time 36175

Part time 36175

Seasonal 15647

3. Services Inquiry 2005: Bars 41405

Persons Engaged

• Full time employees – 17235

• Part time employees – 16657

• Other – 7513

4. DIGI Survey 2003- All Licensed Premises 100,220

• Full time – 47885

• Part time – 42606

• Casual – 9729

Source: As noted in table


All Drinks Cider and Soft Drinks Beer and Spirits

local units enterprises local units enterprises local units enterprises

2000 6133 6146 2216 2216 3917 3930

2001 5963 5952 2333 2334 3620 3617

2002 5871 5876 2476 2478 3395 3398

2003 4851 5223 1844 1843 3007 3380

2004 4585 na 1818 na 2767 3102

2005 4084 4542 1224 1641 2860 2901

2006 na 4468 na na na na

As seen in the above table there are substantialdifferences in the estimates of employment. Some ofthese differences arise because of populationcoverage, survey responses, time period, definitionsused in the collection of the data and sources of data.For example a student working part-time in a publichouse would probably answer the CP questions asbeing a student while her/his employer would includethe student as a part-time employee. However thesetechnical differences do not explain all the differences.For example the 2003 DIGI survey records 33,000 fulltime employees. The Annual Services Inquiry has only19K full time employees in public houses for the sameyear, 2003 and 17235 in 2005. The DIGI survey covershotels, clubs and off-licences and the ASI deals withbars. The coverage of the DIGI survey is morecomprehensive and so a higher level of employmentwould be expected.

The Failte Ireland employment total refers to publichouses. In addition to this people are employed in barsin hotels as discussed below.

The range of employment is from 100K in 2003 (DIGI)to 23K in 2002 (CP). The latter is definitely anunderstatement of actual employment in public housesas it excludes many other bar/public houses occupantssuch as providing food, office staff, cleaning andsecurity.

The retail segment provides a variety of employmenttypes in terms of full-time, part-time and casualpositions. This is evident from three of the sources.There is a substantial part time element in theemployment data in the Failte Ireland survey, the DIGIsurvey and in the Annual Services Inquiry.

The detailed employment breakdown from the DIGIsurvey is shown below.

Table 4.2.3Employment in Fully Licensed Premises (PublicHouses and Other) 2003

Employment Full-time Part-time Casual Total

Category

Proprietors 12656 3233 1113 17002

Assisting 2227 2823 1444 6494

Relatives

Employees 33002 36550 7172 76724

Total 47885 42606 9729 100220

Part-time in the DIGI survey is defined as workingbetween 5 – 21 hours. Casual is defined as less than 5hours. Assuming four part-time jobs are equivalent toone full time and that ten casual jobs make up a fulltime the full time equivalents are (part-time) 14059 andcasual 973. This would give a full time retail equivalentof 59510 in retail of alcohol. This total covers bothpublic houses and other licensed premises. The DIGIsource identifies public house employment as 31261full-timers, 27336 part-timers and 6532 casual staff.This is equivalent to 39401 full-time jobs. As shownbelow this total is less than the Failte Ireland source.

The most up to date source on retail employment isFailte Ireland. On the assumption that four part-timejobs are equivalent to one full time job and that fiveseasonal jobs are equivalent to a full time job the FailteIreland full time equivalent total is 48348. The detailsof the Failte Ireland public house employment areshown below.

Table 4.2.4 Type of Employment in Public Houses 2006

Full-Time Part-Time Seasonal Total Total Full

Persons Time

Equivalents

36175 36175 15647 87998 48348

Source: Failte Ireland Tourism Business andEmployment Survey 2006

In addition to the public houses there is employmentin other licensed premises. The Failte Ireland surveyreports 6414 bar staff in hotels or 13% of the full timeand part time categories. On the assumption that 5%of managers and supervisors and 2% ofclerical/administrative staff are associated with drinksretailing in hotels the total of drinks staff in hotels is6878 or 13.9%. Applying this to the three types ofemployment there are 4527 full-timers, 2332 part-timers and 893 casual staff; a total of 5289 full-timeequivalents. This generates an alcohol retail total of95450 persons or 53637 full-time job equivalents in2006.

Details of the employment types and trends from theASI are shown below in Table 4.2.5.

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Table 4.2.5 Type of Employment in Bars

Some of the yearly changes appear unlikely, forexample the decline of almost 3K in non employees in2004 and the 7K increase in full time employees in2001. The broad trend from 2003 is decline inemployment from 31.9K in 2003 to 28.9K in 2005. Theretail employment in drinks is still very la

the economic contribution of the drinks industry economic...objective the objective of this report...

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